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Trade Finance - Advice
Trade finance is the credit that oils the wheels of international trade. It is provided by a lender to bridge the gap between an order being received and the goods being delivered or sold, and is essential for most importers and exporters. It includes simple and traditional forms of credit, some dating back to the Middle Ages, which enable exporters and importers to fund their shipments.
Trade finance usually involves either “Transactional Finance” or “Stock Finance”:
Transactional Finance sees the lender acting as intermediary between importer and exporter, usually via letters of credit which give both parties additional security and peace of mind regarding the transaction. Credit Insurance can be included to provide protection against bad debts.
Stock Finance also often covers goods in transit – but it can also be used to fund stock already purchased and warehoused against confirmed orders. This is a useful source of working capital, particularly for businesses with large turnover, those that are stock intensive and those whose trade is seasonally dependent.
Without adequate trade finance, the whole process of international trade would get totally glued up – and the credit crunch has certainly made things a lot more difficult for companies needing this form of loan. The premium on cash in today’s markets has seen trade finance costs rising sharply, so it’s more important than ever to seek expert advice in identifying the right package and ensuring that the details of the trade don’t leave companies overly exposed to potentially punitive rates.